CASE NO.: Appeal (civil) 2452 of 2000 PETITIONER: MUNICIPAL CORPORATION OF GREATER MUMBAI AND ANR. RESPONDENT: KAMLA MILLS LTD. DATE OF JUDGMENT: 11/07/2003 BENCH: RUMA PAL & B.N. SRIKRISHNA JUDGMENT:
JUDGMENT
2003 Supp(1) SCR 500
The Judgment of the Court was delivered by
SRIKR1SHNA, J. The central issue involved in both these appeals is: When a
building constructed upon land previously assessed to Municipal lax is
demolished for construction of new building, is it open to the Municipal
Corporation to assess the rateable value of the land till the construction
of the building by taking the market value of the land?
Facts:
The facts relevant for appreciating the controversy, shortly stated, are as
under :
The respondent is a company whose main business was running of a textile
mill known as M/s Kamla Mills Limited in Mumbai. It owned a large area of
land comprising approximately 38,000 sq. mtrs. In the city of Mumbai on
which structures were standing. The entire property (i.e. land & buildings)
was assessed under Ward No. G/S 1955 (1) at rateable value of Rs. 370,505.
The prolonged general strike of the textile workers in Bombay affected
financial position of all the textile mills in Mumbai and a policy decision
was taken by the Government of Maharashtra to permit construction of
residences in the industrial zone in the Bombay Metropolitan Region. As a
result of the newly adopted policy, textile mills which had extensive land,
and were hitherto not permitted to build thereupon, were granted permission
to demolish old structures upon the land and construct residential
buildings and sell them on condition that the finances thereby generated
would be utilized for paying off the dues of the textile employees. Taking
advantage of this liberalised industrial policy, the respondent company
demolished some of the old structures standing on a part of its land in or
about June, 1995 and got plans approved for construction of a new building
complex thereupon consisting of three wings A. B and C.
On 31st January, 19%, the Investigating Officer of the appellant –
Corporation made a Tabulated Ward Report (TWR) No. 441 proposing a revision
of the assessable value of the respondent’s property. The appellant was of
the view that the land under the demolished structures forms a suitable
buildable plot of land whereupon construction work of the building in
phases had been started, and considering the building potential of the land
which had become available, the appellant bifurcated the entire plot of
land falling within Ward No. G/S 1955 (1) into two plots. By another
Tabulated Ward Report No. 442 of 31.1.1996 it was proposed that the land
under the demolished structures formed from June, 1995 a buildable vacant
plot of 15014 sq. mtr. on which construction had commenced. It was proposed
to “treat the whole plot of land admeasuring 15014 sq. mtr. as plot of land
under construction” and to revise its rateable value to Rs. 53, 50,990 by
adopting a rate of Rs. 3300 per sq. mtr. Consequently, the rateable value
of the residual plot was reduced from Rs. 3,70,505 to Rs. 2,36,130. The
respondent filed complaints objecting to the proposed revision of the
rateable value in respect of both the plots. These complaints were heard by
the appropriate officer. By an order made on 12.2.1998, the concerned
officer reduced the rateable value by adopting the rate at Rs. 3,000 per
sq. mtr. He also assessed the property in two parts i.e., ‘A’ Wing “as plot
of land under construction” and ‘B’ & ‘C’ Wings “as plot of land”. He
adopted the uniform rate of Rs. 3,000 per sq. mtr. for both the plots and
assessed the rateable value at Rs. 31,1 1,595 w.e.f. 1.12.1995. By another
order made on 11.3.1998. the appropriate officer of the appellant –
Corporation fixed the rateable value w.e.f. 1.10.1996. The order made by
the appropriate officer of the appellant – Corporation records that during
the hearing of the complaints though the respondent suggested that the
value of the land be determined by taking the rate of Rs. 2500 per sq.
mtr., the respondent did not adduce any evidence or reasons for reducing
the market rate of the buildable vacant land from Rs. 3000 per sq. mtr. to
Rs. 2500 per sq. mtr. Consequently, this suggestion of the respondent was
not accepted and the concerned officer fixed the rateable value of both the
plots of land at Rs. 31,11,595 w.e.f. 1.6.1995 by adopting the market rate
of land at Rs. 3000 per sq. mtr.
The respondent filed two appeals before the Small Causes Court. Municipal
Appeal No. 367 of 1998 was directed against the order of the Investigating
Officer dated 11.3.1998 passed in Complaint No. 140 of 1996/97 fixing the
rateable value w.e.f 1.10.1996. Municipal Appeal No. 370 of 1998 was
directed against the order of the Investigating Officer dated 12.2 1998.
The Small Causes Court heard the appeals and by a common judgment In Id
that the appellant – Corporation was not entitled to revise the rateable
value by adopting the market rate. It was also held that the Investigating
Officer had failed to follow the principle laid down by this Court in the
case of the Municipal Corporation of Greater Bombay v. M/s. Polychem Ltd.,
[ I974] 2 SCC 198, that the rate adopted by the Investigating Officer was
excessive and exorbitant, and that the proper rate of assessment should be
Rs. 654 per sq. mtr.
After setting aside the order of the Investigating Officer dated 11.3 1998,
the Small Causes Court determined the rateable value of wing ‘A’ at Rs.
26,96,355 w.e.f. 1.10.1996, and for wing’B’&’C'(as vacant land) at Rs.
89,396, w.e.f. the same date. The appellants were directed to issue fresh
bills accordingly with a direction to refund the excess amount paid alter
adjusting against taxes due.
The appellant – Corporation challenged the judgments of the Small Causes
Court before the High Court by filing two appeals. First Appeal No. 660/99
against the judgment in Municipal Appeal No. 370/98 was summarily rejected
on the ground that no interference was called for. First Appeal No. 659/99
directed against the judgment of the Small Causes Court in Municipal Appeal
No. 367/98 was also rejected by taking the view that in Dewan Daulat Raj
Kapoor v. New Delhi Municipality, AIR (1980) SC 541 this Court has laid
down that the annual value at which the building can reasonably be experted
to let must be limited to the measure of standard rent determined under the
Rent Act and cannot be determined on the basis of the higher rent actually
received by the landlord from the tenant.
Being aggrieved by the said two judgments of the High Court the appellant
is before this Court. The appellant filed an application for producing
certain additional documents before this Court vide I.A. No. 2 of 2000. It
was pointed out that in response to notices issued by the appellant –
Corporation under Section 155 of the Bombay Municipal Corporation Act, the
letters dated 16.12.1999 and 24.12.1999 were received from National Stock
Exchange of India Limited and National Securities Depository Ltd.,
respectively, indicating the actual amounts paid by them for occupation of
certain portions of the building known as “Trade World” which had been
constructed by the respondent after demolition. Since these documents
became available after the High Court had delivered its judgment, the
appellants craved leave to rely upon them. This application was allowed by
an order dated 3.4.2000 made by this Court.
Contentions:
The appeals pertain to two different aspects. One pertains to the completed
building ‘A’ wing and the other pertain to the vacant land. With regard to
the completed building ‘A’ wing, learned counsel for the appellant contends
that the assessee deliberately failed to furnish the particulars of leave
and license / rent at which the premises had been given to the occupants.
It is only after the notice issued under Section 155 that the appellant was
able to gather information that at the material time National Stock
Exchange of India Limited was paying Rs. 53,92,049.46 to the respondent for
occupation of basement and three upper floors and similarly National
Security Depository Ltd. was using and occupying 4th and 5th floors of ‘A’
wing on ownership basis. The learned counsel contends that the judgment of
this Court in Polychem (supra) merely holds that when a building on land,
previously rated, is demolished, and new construction is commenced, the
land upon which the construction is being made, should continue to be rated
as vacant land. However, this Court has not laid down that its rateable
value should be the same as prior to the demolition of the building. It is
contended that even if the rateable value of a building is to be held
limited to the standard rent, and the assessment of the rateable value has
to be done on the said basis, the evidence on record clearly shows that the
building was being assessed for the first time and, therefore, the actual
letting value of the premises has to be taken as the basis for working out
the rateable value irrespective of the fact that it was styled as ‘leave
and license compensation’. The actual amount paid by the National Stock
Exchange India Limited and National Securities Depository Limited must be
taken as the basis for working out the rateable value of the land under
construction from 1.10.1996 onwards.
With regard to the assessment for rating of the vacant land, the learned
counsel for the appellant contends that, after demolition of the structures
on the land, the character of the land changed inasmuch as its building
potential increased tremendously. Since the land as such had not been
assessed previously, it had to be assessed for rateable value on the basis
of “Contractor’s Method” by taking a suitable percentage of the market
value, which was one of the known methods of assessing the rateable value.
Hence, from 1.10.1996 the appellant had rightly proposed the rateable value
on the basis of the market value of the land at Rs. 3300 per sq mtr. while
the respondent had made a counter suggestion that it should be 2500 sq.
mtr. as fair and reasonable value without producing any evidence in
support. In the circumstances, the appellant’s orders that the rateable
value should be worked out by taking market value of land at Rs. 3,000 per
sq. mtr. was not liable to be disturbed. The learned counsel contends that
both the Small Causes Court and the High Court have misunderstood the
judgment of this Court in Polychem (supra). In Polychem (supra) this Court
has merely laid down that once the building is demolished, the land does
not cease to have rateable value (as the doctrine of sterility does not
hold good in India), but continues to be rateable as “vacant land”. This
Court has nowhere laid down that the land should be rated only at the rate
prevalent prior to the demolition of the structures Since “contractor’s
method” is a known method of assessing the rateable value of land, no fault
could be found with the rateable value arrived at by the appellant –
Corporation.
The learned counsel for respondent urged the following propositions of law
to support the judgments of the courts below:
(i) The rateable value of land and building is limited by the measure of
standard rent arrived at by the assessing authority by applying the
principles laid down in the Bombay Rent Act and cannot exceed the figure of
the standard rent so arrived at by the assessing authority.
(ii) The standard rent of premises (land or land & building) is based on
allowing the landlord a reasonable return on his investment. It is linked
to the capital investment of the landlord and not linked to the market
value of the premises. Under the Bombay Rent Act the standard rent of
premises always remains fixed
(iii) As the standard rent (of premises land or building) remains fixed
under the Bombay Rent Act, the Corporation could not have revised the
rateable value of land under construction, even if” it is treated as vacant
land under the ratio of the judgment in Polychem case, on the basis of the
current market value of the land or the current market value of the
building.
“to-
According to the learned counsel for the respondent, Polychem holds that
once the building is demolished and reconstruction is commenced on the
land, the land must be treated as vacant land for the purpose of rateable
value and its rating has to remain frozen at what it was earlier unless
there has been additional investment or improvement therein. In the instant
case, what was being assessed for rateable value was subject to the limit
of standard rent applicable under the Bombay Rent Act and merely because
the land had building potential, The Corporation was not entitled to revise
the rateable value.
Both sides cited a large number of authorities in support of their
respective cases which we shall presently notice.
Law:
Under Section 139 of the Bombay Municipal Corporation Act, the Corporation
is inter alia empowered and obligated to impose property taxes. The
property taxes comprise general tax, water tax, sewage tax and so on. All
these taxes are leviable at such percentage of the rateable value as
determined by the Municipal Corporation. The manner of determination of
rateable value, therefore, becomes crucial to the debate before us. The
material portion of Section 154 of the Mumbai Municipal Corporation Act
relevant for our discussion reads as under:
“Section 154(1) – In order to fix the rateable value of any building or
land assessable to a property tax, there shall be deducted from the amount
of the annual rent for which such land or building might reasonably be
expected to let from year to year a sum equal to ten per centum of the said
annual rent and the said deduction shall be in lieu of all allowances for
repairs or on any other account whatever.”
The key words of Section 154( 1) are “the amount of the annual rent for
which such land or building might reasonably by expected to let from year
to year” (emphasis added). Considerable forensic skill and judicial talent
have been expended to ascertain the meaning of these words. Depending upon
whether the area in question is subject to Rent Restriction Legislation or
not, the Courts have answered the question differently.
Counsel placed reliance on the following judgments in support of the
proposition that the rateable value of a premises is limited by the
standard rent determined or determinable under the provisions of the Rent
Restriction Legislation.
1. [1998] 6 SCC 381. Govt. Servant Coop. House Building Society Ltd.
v. Union of India
2. [ 1998] 4 SCC 368, East India Commercial Co. (?) Ltd. v. Corpn. of
Calcutta.
3. [1995] 4 SCC 696, Asstt. G.M., Central Bank of India v. Commr. ,
Municipal Corpn. For the City of Ahmedabad.
4. [1995] 4 SCC 96, Indian Oil Corpn. Ltd. v. Municipal Corpn
5. [ 1994] 6 SCC 572, Srikant Kashinath Jituri v. Corpn. of the– City
of Belgaum.
6. [1985] 1 SCC 167, Balbir Singh (Dr.) v. MCD.
7. [1980] 1 SCC 685, Dewan Daulat Rai Kapoor v. New Delhi Municipal
Committee
8. [1976] 4 SCC 622, Municipal Corpn., Indore v. Ratnaprabha
9. [1970] 2 SCC 803, Guntur Municipal Council v. Guntur Town Rate
Payers’ Assn.
10. [1970] 2 SCC 44, Corpn, of Calcutta v. L1C of India.
11. AIR (1962) SC 151, Corpn. of Calcutta v. Padma Debi.
We are, fortunately, spared the effort of having to analyse these judgments
in detail and ascertain their ratios, as two judgments of this Court have
already anticipated and carried out this task for us.
In East India Commercial Co. (P) Ltd. v. Corpn of Calcutta, [ 1998] 4 SCC
368 all these judgments were analysed by this Court and the position in law
was neatly summed up as under:
“From the aforesaid decisions, the principle which is deducible is that
when the Municipal Act requires the determination of the annual value, that
Act has to be read along with Rent Restriction Act which provides for the
determination of fair rent or standard rent. Reading the two Acts together
the rateable value cannot be more than the lair or standard rent which can
be fixed under the Rent Control Act. I he exception to this rule is that
whenever any Municipal Act itself provides the mode of determination of the
annual letting value like the Central Bank of India case relating to
Ahmedabad or contains a non obstante clause as in Ratnaprabha case then the
determination of the annual letting value has to be according to the terms
of the Municipal Act. In the present case, Section 168 of the Municipal Act
docs not contain any non obstante clause so as to make the Tenancy Act
inapplicable and nor does the Act itself provide the method or basis for
determining the annual value. This Act has, therefore, to be read along
with Tenancy Act of 1956 and it is the fair rent determinate under Section
8 (1) (d) which alone can be the annual value for the purpose of property
tax.” (Vide paragraph 17).
Since that was a case pertaining to the Calcutta Municipal legislation, the
reference therein is thus to Section 8(1) (d) of the West Bengal Tenancy
Act, 1956.
Despite the law having been thus clearly laid down in East India Commercial
Co, (P) Ltd. (Supra), thanks to ingenuity of counsel, the issue was
reagitated before this Court in India Automobiles (I960) Ltd \. Calcutta
Municipal Corpn., [2002] 3 SCC 308. This Court once again carried out a
survey of the judgments and culled out the law as under (vide paragraph
21):
“A perusal of various judgments, relied upon by the learned counsel for the
parties, clearly shows that this Court has taken a consistent view
regarding the determination of annual value of land or building for the
purposes of determination of taxes under the Municipal Acts. On the basis
of various statutes relating to the determination of the annual value for
the purposes of the Municipal Acts, this Court has devised two distinct
groups. One such group deals with the municipal laws of some States which
do not expressly exclude application of the Rent Restrictions Acts in the
matter of determination of annual value of a building for the purposes of
levying municipal taxes and the other group deals with the municipal laws
which expressly exclude application of the rent Restriction Acts in the
matter of determination of annual value of land or building on rental
method. Whereas in the first category of cases the determination of annual
value has to be made on the basis of fair or standard rent notwithstanding
the actual rent, even if it exceeds the statutory limits. In the other
group where the restriction in the rent Acts has been excluded, the
determination of annual value of the building on rental method is referable
to the method provided under the relevant Municipal Act. Whereas Padma Debi
case, LIC case, Guntur Town Rate Payers case and Dewan Daulat Rai case deal
with the first group of municipal laws, the cases in Ratnaprabha case, AGM,
Central Bank of India case. East India Commercial Co. case, Balbir Singh
case, Indian Oil Corpn. Case and Srikant case deal with the second group.
As already noticed, this Court in LIC case dealt with the first category as
in Section 168 of the Calcutta Municipal Corporation Act, there existed no
non obstante clause. The observations of the Bench of this Court which
dealt with the case on 10.10.2001 cannot be taken in isolation.”
It was further observed (vide paragraph 23):
“As already noticed even without specific determination, the standard rent
was held to have been statutorily determined under Section 2(10) (b) of the
Rent Act. Upon analysis of the various municipal laws and the judgments of
this Court it is held that in cases where the municipal laws exclude the
applicability of the Rent Acts by incorporating non obstante clause in the
taxing statute, the powers of the authorities under the Municipal Acts are
not circumscribed by the limits indicated in Padma Debi case and followed
in that group of cases. In cases where the fair rent payable by the tenant
has been determined and there is no justification for refusing to accept
that fair rent as rental value of the premises, the municipal authorities
should generally accept the standard rent fixed, notwithstanding the non-
applicability of the Rent Acts because such a view would be a reasonable
guideline to determine the rate of rent at which such land or building
might, at the time of assessment, be reasonably expected to let from year
to year. The rent which the tenant is receiving from his subtenant is also
an important statutory consideration for determining the rent at the time
of assessment to which the property might reasonably be expected to be let
from year to year. Such a consideration is also justified on the principles
of reasonableness. We cannot agree that in all cases, notwithstanding the
non obstante clause the annual rental value cannot be fixed beyond the
standard rent determined or determinable under the rent statute. We also
find it difficult to hold that in all cases the rent actually paid by the
sub-tenant to the tenant be taken as a sole criterion for determining the
annual value on the assumption that such land or building might, at the
time of assessment, is reasonably expected to get the aforesaid amount of
rent if let from year to year.”
Now that the law has been culled out to the exercise of applying it.
The case before us is governed by the provisions of a Rent Restrictions
Legislation viz. The Bombay Rent Act. The Bombay Municipal Corporal ion Act
neither contains a statutory definition of ‘rateable value’, nor does it
lay down the manner in which the rateable value has to be computed, as
distinguished from the situation in Commissioner v Griha Yajmanule Samkya
and Ors., [2001] 5 SCC 561. The Bombay Municipal Corporal on Act neither
contains a defining clause, nor a non-obstante clause, which would hold the
field, notwithstanding the definition of ‘standard rent’ in the Bombay Rent
Act. Therefore, prima facie, this would be a case which would all within
the general principle laid down by the series of judgments commencing Padma
Devi (supra) and ending with Srikant Kashinath Jituri (supra).
The contention of the learned counsel for the respondent that the rateable
value to be fixed under Section 154(1) of the Bombay Municipal Corporation
Act is limited by the measure of the standard rent within the meaning of
Section 5 (10) of the Bombay Rent Act appears to be justified, particularly
in view of the fact that Section 7 of the Bombay Rent Act makes it illegal
to claim of any rent or any licence fee in excess of the standard rent.
Thus, in determining what would be the “amount of the annual rent for which
such land or building might reasonably be expected to let from ‘ear to
year” for the premises, meaning thereby land or building, since both are
included in the definition of the premises in Section 2 (3) (g), one has to
I eep in mind that determining anything contrary to law could not be
“reasonable” as a hypothetical tenant would hardly be inclined to pay a
rent in excess of the standard rent, though, on account of circumstances
which may be peculiar to the property, the reasonable rent which may be
offered by the hypothetical tenant could even be less than the standard
rent.
Mr. Singhvi, learned counsel for the appellant, urged that this contention
cannot be accepted for several reasons. First, he urged that such a
contention was never raised at any stage of the proceedings either before
the Investigating Officer, Small Causes Court, or even before the High
Court. He contends that ‘standard rent’ is a pure question of fact, or, at
any nite, a mixed question of law and fact, and ought not to be permitted
to raise before this Court first time. He, therefore, urged upon us to
decline permission for this ground to be raised. Though, as a normal rule,
this Court does nut permit in appeal the raising of a totally new ground,
particularly when wider r; mifications may arise, we are inclined to permit
raising this ground for more than one reason. First, that the proposition
of law that rateable value is limited by the amount of the standard rent,
per se does not require actual invesigation. as it appears to be well
settled by catena of decisions of this Court Secondly, we find that the
High Court and the courts below focused the r attention merely on the ratio
laid down in the judgment by this court in Polychem (supra) without
adverting to this proposition of law which appears to be well established.
Thirdly, substantive justice requires over-looking of the rigid rule,
particularly when the contention, if permitted to be urged, does not cause
prejudice to the opposite party.
Mr. Singhvi then contended that under Part-II of the Mumbai Rent Act, which
contains the provisions with regard to the standard rent, the restrictions
imposed under Section 7 would apply in respect of the premises only if they
are let. He contended that entire Part – II of the Rent Act would not apply
to the premises of Kamla Mills since the premises was never let out at any
time earlier and, therefore, the restrictions under Section 7 of the Mumbai
Rent Act would not apply. In our view, the argument is untenable. What we
are required to consider is what would a hypothetical tenant be willing to
offer as reasonable rent for the premises in question. Upon the premises
being offered to be let, there would be hypothetical tenant; that
hypothetical tenant would look at the restrictions applicable under the
rent legislation and make a reasonable offer. Section 6 in Part-II of the
Mumbai Rent Act, therefore, is hardly of relevance. We may examine the
question from another angle. It surely cannot be contended that no rateable
value can be fixed in respect of the premises occupied by the owner
himself. In fact, Section 154 (I) of Mumbai Municipal Corporation Act would
apply equally to such premises. Even in such a situation, the reteable
value has to be ascertained on the basis of what a hypothetical tenant
would offer for it as reasonable rent. If Mr. Singhvi’s argument that
Section 6(1) of the Mumbai Rent Act makes the provisions of Part-II
inapplicable to such premises is accepted, then no taxes would be payable
by any owner for self-occupied property. We, therefore, reject this
contention.
It is next contended by Mr. Singhvi that Bombay Municipal Corporation Act,
1888 is a complete code for determination of the rateable value and is not
subject to the provisions in the Bombay Rent Act, 1947. Our attention was
drawn to the fasciculus of Sections 139, 140, 146, 147, 154, 155. 156 to
167 and 217 of Bombay Municipal Corporation Act in support of the
contention. In our view, the contention is unsustainable. No doubt the
Bombay Municipal Corporation Act is a legislation for fixing of the
rateable value and imposing of property tax, but it nowhere defines what
‘rateable value’ is, except in general terms under Section 154 (1). If the
statute had defined ‘rateable value’ in specific terms, then the argument
may have been sustainable, as sustained in Griha Yajmanule Samkhya and Ors.
(supra). It must be remembered that the principle of ‘standard rent’ has
not been invoked by reason of any requirement or declaration under the
Municipal Corporation Act. but by reason of the fact that if the rateable
value is the reasonable annual rent at which the property may be expected
to be let, then we must consider what a hypothetical tenant would be
willing to offer as rent for the oroperty let. As has been pointed earlier,
the concept of reasonableness would necessarily include the concept of an
owner and a tenant who are both law abiding and do not indulge in “black
marketing”. If there is a rent restriction legislation which imposes a
limit on the rent which can be charged, then the concept of
“reasonableness” would include that restriction also. This is the reason
why in a series of judgments of this Court it has been laid down that the
rateable value is limited by the standard rent determined or determinable
under the provisions of the Rent Restriction Legislation. The only
exception made was in a situation like Griha Yajmanule Samkya and Ors.
(supra), where the Municipal Corporation Act has a detailed method to fix
the rateab e value. As already noticed by the judgments of this Court,
barring the two exceptional cases of Municipal Legislation containing non-
obstante clause or deeming clause with regard to the rateable value, it
must necessarily be held to be limited by the standard rent determined or
determinable under the applicable rent control legislation.
We are unable to accept the contention of Shri Singhvi that this case falls
within the ratio of Griha Yajmanule Samkya and Ors. (supra). In that case
the municipal legislation in Hyderabad specifically contained detailed
provisions for fixation of monthly or yearly rent. Examining the statute
before it, this Court took the view that the statutory provisions required
the tax to be levied on the basis of rateable value as fixed by the
Corporation and there was further provision in the Act as to the method or
manner of determination of the rateable value. Hence, this Court observed
(vide paragraph 35), “the act mandates that the Commissioner shall
determine the tax to be p lid by the person concerned in the manner
prescribed under the statue and the rules. It is our view that the Act and
the Rules provide a complete code for assessment of the property tax to be
levied upon buildings within the Municipal Corporation. There is no
provision in the statute that the fair rent determined under the Rent
Control Act in respect of a property is binding on the Commissioner. The
legislature has wisely not made such a provision because determination of
annual rent depends on several criteria”. We are, therefore. unable to
accept the contention of Shri Singhvi in this regard.
It is next contended by Shri Singhvi that Section 5 (10) (b) and Section 11
of the Mumbai Rent Act, 1947 have been declared to be ultra vires Article
14 of the Constitution by this Court in Malpe vishwanath Acharya and Ors.
v. State of Maharashtra and Anr., [1998] 2 SCC 1. It is undoubtedly true
that this Court held the aforesaid provisions of the Bombay Rent Act to he
unreasonable and liable to be struck down as unreasonable and arbitrary.
However, this Court refrained from striking down the same in view of the
fact that the existing Act was to lapse on 31.3.1998. Hence, this Court
made the following directions:
“We however refrain from striking down the said provisions as the existing
Act elapses on 31.3.1998 and we hope that a new Rent Control Act will be
enacted with effect from 1.4.1998 keeping in view the observations made in
this judgment insofar as fixation of standard rent is concerned. It is,
however, made clear that any further extension of the existing provisions
without bringing them in line with the views expressed in this judgment,
would be invalid as being arbitrary and violative of article 14 of the
Constitution and therefore of no consequence. The respondents will pay the
costs.”
This judgment need not detain for another reason. We are concerned with the
period prior to 31st March, 1998, at which time, admittedly, the concerned
sections were not held to be bad, by this Court despite noticing the
infirmity in the sections. For this reason also, we are unable to accept
the contention.
Shri Singhvi then contended that the appeals must fail for failure to place
the requisite evidence on record. He contends that there is no warrant for
the assumption and assertion of the respondent that the rateable value for
the property of the respondent for the years 1994-95 and 1995-96 was based
on “standard rent”, nor is there any warrant for the assertion that the
land had been separately valued as contended. There appears to be merit in
this contention. While the material on record shows that prior to 1994-95
the rateable value of the entire property before the demolition was fixed
at Rs. 3,70,505, there is no evidence on record to show either that this
was based on standard rent or that there was any assessment of the land and
structures separately. Learned counsel relied on the judgment of this Court
in National and Grindlays Bank Ltd. v. The Municipal Corporation of Greater
Bombay, [1969] 1 SCC 541, a case arising under the Bombay Municipal
Corporation Act, 1888 itself, in which the court observed that the Act was
passed in the year 1888 and Municipal Corporation had a practice for a very
long time of treating the land and the building constructed upon it as
single unit and charging the property tax upon the owner of the land in a
case where the land is let for a period of less than one year to a tenant
who has constructed a building thereupon, approving the observations made
by the Division Bench of the Bombay High Court in Ramji Keshavji v.
Municipal Corporation for Greater Bombay, [56 Bom. LR 1132]. Relying on
this judgment the learned counsel for the appellant contended that, far
from there being material to suggest that rateable values were fixed
separately for land and building, judicial notice has been taken of the
fact that the land and buildings were rated as a composite unit by the
Bombay Municipal Corporation is matter of practice. Placing reliance on the
judgment of this Court in AGM, Central Bank of India v. Commr. Municipal
Corporation, [1995] 4 SCC 696 it is urged that once the Commissioner of the
Corporation has fixed the rateable value, the burden is upon the tenant to
show as to what should be the correct rateable value. In the present case
the respondent failed to lead any evidence to show why Rs. 3,000 per sq.
mtr. was not a reasonable market value, nor did it adduce any evidence to
show that Rs. 2500 per sq. mtr. was the reasonable market value. In the
circumstances, Shri Singhvi contends that taking the market value at Rs.
3,000 per sq. mtr. was perfectly justified for assessing the rateable
value.
It is next contended by the appellant that even if we assume that the
provisions of Bombay Rent Act apply, ‘standard rent’ is different y defined
by the Bombay Rent Act. Section 5(10) (b) defines standard rent as under:
“Section 5 (10) (b) – When the standard rent is not so fixed – subject to
the provisions of Section 11,
(i) the rent at which the premises were let on the first day of September,
1940 or
(ii) where they were not let on the first day of September, 1940, the rent
at which they were last let before that day, or
(iii) where they were first let after the first day of September, 1940, the
rent at which they were first let, or
[(iii-a) notwithstanding anything contained in paragraph (iii) the rent of
the premises referred to in sub-section (1-A) of Section 4 shall, on expiry
of the period of five years mentioned in that sub-section, not exceed the
amount equivalent to the amount of net return of fifteen per cent, on the
investment in the land and building and all the outgoings in respect of
such premises; or]
(iv) on any of the cases specified in section 11, the rent fixed by the
court; Section II contemplates that the Court may fix the ‘standard rent’
in certain cases which are indicated by clauses (a) to (e) of sub-section)
(I) and sub-section (2), when an application for fixing the standard rent
is made Section 11 reads as under:
“Section 11(1) – [Subject to the provisions of Section IIA in any of the
following] cases the Court may, upon an application made to it for that
purpose, or in any suit or proceedings, fix the standard rent .at such
amount as, having regard to the provisions of this Act and circumstances of
the case, the Court deems just –
(a) where any premises are first let after the first day of September,
1940 and the rent at which they are so let is in the opinion of the Court
excessive; or
(b) where the Court is satisfied that there is not sufficient evidence
to ascertain the rent at which the premises were let in any one of the
cases mentioned in [paragraph (i) to (iii) of sub-clause (b) of clause
(10)] of section 5; or
(c) where by reason of the premises having been let at one time as a
whole or in parts and at another time in parts or as a whole, or for any
other reason, any difficulty arises in giving effect to this Part; or
(d) where any premises have been or are let rent free or at a nominal
rent or for some consideration in addition to rent; or
(d-1) without prejudice to the provisions of sub-section (A) of Section 4
and paragraph (iii-a) of sub-clause (b) of clause (10) of Section 5, where
the Court is satisfied that the rent in respect of the premises referred to
therein exceeds the limit of standard rent laid down in the said paragraph
(iii-a); or]
(e) where there is any dispute between the landlord and the tenant
regarding the amount of standard rent.”
“Section – 11(2) – If there is any dispute between the landlord and the
tenant regarding the amount of standard rent.”
Section 11 read with Section 5(10) (b) of the Bombay Municipal Act, 1947
makes it clear that where premises were let before, on or after the first
September, 1940 the first letting rate shall be the standard rent subject
to the provisions of Section 11. In the present case, as to whether the
premises in question were let before first September, 1940, or thereafter,
and, if so, what was the first letting rate, is not ascertainable from the
record. In the circumstances, Shri Singhvi submits that the other
alternative method of finding out the standard rent is “contractor’s
method” which has been judicially approved. Under this method the market
value of the land has to be ascertained and reasonable return fixed
thereupon to determine the standard rent. This is precisely what was done
by the assessor and Collector by taking the market value Rs. 3,000 per sq.
mtr. as a fair value with a reasonable return of 12% thereupon, in fact,
even the respondent suggested only Rs. 2500 per sq. mtr. as the fair market
value and did not raise any dispute with regard to the fair return. The
Bombay High Court in Harilal Parekh v. Jain Coop. Housing Society, AIR
(1957) Bom. 207 and Saipansaheb Wd. Dawoodsaheb v. Laxman Venkatesh Naik,
57 BLR 413, pointed out that under Section 5 (10) (b) (1) the first letting
on first September, 1940 becomes the standard rent subject to the provision
of Section 11 of the Act and, when the occasion arises, the Court has the
jurisdiction to re-determine it under Section 5 (10) (b) (1), where the
case falls under Section 11 (1) (e) of the Bombay Rent Act. It was also
pointed in Harlal Parekh (supra) that the premises were first let after
first September, 1940 and the rent shall be equivalent to 6% on the
valuation of land and 8.2/3% on the valuation of building.
It is true that Section 11 of the Rent Act provides that even standard rent
can be altered and re-fixed if there is any structural alteration or change
in the amenities. It is urged by Shri Singhvi that demolition of tre
building and increasing the building potential of the land is one such
change contemplated by Section 11 (a). This contention, we are unable to
accept. Section 11 (a) is intended to enable the Court, upon an application
n any suit or proceeding, to modify the standard rent as a result of
structural alteration or change in the amenities involving further capital
investment of I he owner. We do not think that demolition of a building is
one such contingency contemplated by Section 11 (a) of the Act.
In the result, though we accept the proposition urged by the respondent
that in the facts of the present case the standard rent would be the limit
of the rateable value, we find that there was no material produced on
record at any stage by the respondent to show what the standard rent was
either in respect of the vacant land or in respect of the land on which the
building was constructed and demolished, or in respect of the building
after it was constructed. We accept the contention of the appellant that
the hurden of proving this fact, while objecting to the rateable value
fixed by the Commissioner, is always on the respondent-assessee. We also
accept the contention of the appellant that the respondent was less than
fair to the appellant in not disclosing that its property had been occupied
by National Stock Exchange of India Ltd. and National Security Depository
Ltd. and in not disclosing the amounts paid by them. The respondent ought
to have disclosed the fact, fairly and fully, and urged the legal
contentions open to it based thereupon. These facts would have justified
our allowing the appeal fully and restoring the assessment orders made by
the appellant officers. However, we are not inclined to do so for the
reason that the attention of the parties has not been focused on the core
issue, as a result of which, perhaps, there was failure to produce relevant
material before the assessor to show what was the standard rent. The
interests of justice would require that the issue be reconsidered after
giving an opportunity to the respondent to discharge the burden placed upon
it under law.
In the result, we allow the appeals and set aside the judgments of the High
Court and Small Causes Court. The concerned proceedings are restored before
the Assessor and Collector who shall hear and dispose the complaints after
giving an opportunity to the respondent to produce such material as they
may desired in support of their objections to the assessments made by the
appellant.
In the circumstances of the case, the appeals are thus allowed with costs
quantified at Rs. 50,000.